Reimbursement light, consumer facing healthcare companies offer investors upside, says J.R. Davis, a Managing Partner with Blue Sea Capital.
DAVIS: They're pretty expensive ones. I think it at the same time deals where folks have a high degree of conviction and I think the only way to have a high degree of conviction in a pricey market is to be thematic, and have really prepared mind, know your subsectors well, almost at the point of being a strategic and be able to separate quality from lack of qualities you're paying up for things to make sure you get the value equation, right?
Yes. I think a lot of its places we play in which are more reimbursement light multi-site consumer facing you know bug and kind of quasi retail healthcare. So whether it's physical therapy, urgent care, animal health you name it. Those have always been a nice area where there's a lot of ways to win a few ways to lose. in addition to that I think practice physician practice management's been pretty hot. A lot of that's been spurred by Macra coming down the pike even though it's been delayed a bit here. I think stoking some fear amongst the physician community and the need for scale and for the private equity community.
I think people see a way to perhaps overpay for the platform but at the same time see a good path to building value throughout on acquisitions and building out the scale. I think certainly there's a I guess a lot of capital chasing you know the opportunities that are out there and so that would be the biggest you know headwind. But from a macro standpoint, healthcare is big, it's growing it's very fragmented due to the local nature of the business and scale increasingly matters more. And I think there are a lot of ways to again to win to make money in the lower-middle market.